Brazil¡¯s two biggest construction tycoons arrested in Petrobras case

The heads of two of Brazil¡¯s largest construction and engineering firms were being held in custody on Monday in the city of Curitiba, following their arrests last week in connection with a massive ongoing fraud and kickbacks scheme at state-owned oil company Petrobras.

Marcelo Odebrecht ¨C one of Brazil¡¯s richest men ¨C and Ot¨¢vio Marques de Azevedo were among the top executives at Odebrecht SA and Andrade Gutierrez SA, respectively, and were both detained in a large police operation that took place in S?o Paulo on Friday.

Prosecutors believe the two firms spearheaded a bribery conspiracy

Odebrecht, who runs the family-owned conglomerate, and Marques de Azevedo, who served as CEO at Andrade Gutierrez, are being investigated in connection with bribes that were allegedly paid to former managers and directors at the energy giant through bank accounts in Switzerland, Panama and Monaco. The United States is also investigating.

According to prosecutors, the two companies spearheaded a conspiracy with other firms to obtain public-funded contracts through fraudulent means.

The so-call Lava Jato (car wash) case has placed a spotlight on President Dilma Rousseff, who served as head of Petrobras during the time the alleged conspiracy took place. Rousseff has denied knowledge of any criminal activity at the oil company during her tenure.

Former President In¨¢cio Lula da Silva has also been tainted by the scandal after federal prosecutors opened a separate investigation last month to see whether he improperly used his connections to benefit Odebrecht. In 2011, Lula da Silva frequently traveled abroad at the company¡¯s expense.

Brazilian diplomatic telegrams made public earlier this month purportedly describe how Lula da Silva lobbied on behalf of Odebrecht for projects around the world. The news magazine ?poca published the cables after the government handed them over in response to a Freedom of Information request.

The former president has denied any wrongdoing.

Police believe that bribes paid by company officials at Odebrecht and Andrade Gutierrez amount to some $230 million. As part of the scheme, authorities said that the firms would pay kickbacks at a rate of three percent of the total amount of the contract.

Other suspects arrested in the case are M¨¢rcio Faria, Alexandrino Alencar and Rog¨¦rio Ara¨²jo, all top officials at Odebrecht, and a director at Andrade Gutierrez, Fl¨¢vio L¨²cio Magalh?es.

Police believe bribes paid by company officials at Odebrecht and Andrade Gutierrez amount to $230m

Another official at Andrade Guti¨¦rrez, C¨¦sar Ramos Rocha, is also under investigation but his whereabouts are unknown.

The suspects, who have not been formally charged, were flown to Curitiba, where the inquiry is taking place, and will remain in preventive custody until a judge determines whether they should be granted bail, officials said.

The alleged conspiracy took off in 2002 while President Fernando Henrique Cardoso, of the Brazilian Social Democratic Party (PSDB), was still in office, and is reported to have continued through the subsequent Workers Party (PT) administrations of Lula da Silva and Rousseff.

At least three witnesses have given sworn statements admitting to the bribery schemes and turned over documents as evidence, according to prosecution sources.

The presidents all had knowledge of what was happening ¡±

¡°The presidents all had knowledge of what was happening in those companies,¡± said Federal Police investigator Igor Rom¨¢rio de Paula,

Company officials at both Odebrecht and Andrade Gutierrez have denied ever paying bribes.

But Petrobras directors have acknowledged that some €1.8 billion in company funds has been diverted in a massive fraud scheme involving businessmen and politicians.

Police are also investigating whether the Chamber of Deputies speaker Eduardo Cunha and Senate leader Ren¨¢n Calheiros have any direct involvement.

The former treasurer of the ruling PT, J?ao Vaccari, has been in custody since April and is considered one of the key players in the conspiracy.